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10 Worst States for Business Taxes

The Tax Foundation’s 2014 State Business Tax Climate Index used five key factors to determine rankings, with these states being the most burdensome.

The Tax Foundation released on Wednesday the results of its 2014 State Business Tax Climate Index. This is the 10th iteration of the index from the Tax Foundation, a non-partisan research firm.

A state’s position on the index is not just a question of total taxes paid. For a state’s tax climate to be considered good, the Tax Foundation looked at how many major taxes were levied on companies doing business there. States that either forgo major taxes or keep rates low were more likely to appear in the top 10.

However, states’ position in the index is also relative. One state’s ranking might be higher simply because another state’s tax code is more burdensome. “Every tax law will in some way change a state’s competitive position relative to its immediate neighbors, its geographic region and even globally,” according to the report.

“The states that lost ground this year usually did so because they changed policy in a way that makes the tax code more complex, burdensome or economically harmful,” Scott Drenkard, Tax Foundation economist, said in a statement. “By contrast, the states that improved did so because they are moved closer to a tax code that collects revenue without unnecessarily distorting business decisions. Their tax codes became more neutral.”

The Tax Foundation rated states based on five tax categories. Each category was weighted differently based on how likely each component is to change; those with greater variability have more weight.

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